Tax Planning Opportunities with 529 College Plans

by | Oct 28, 2021 | Wealth Management

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With potential tax changes on the horizon, funding a 529 college plan deserves careful consideration. 529 college plans allow an individual to donate up to $15,000 per year for each beneficiary ($30,000 per year for married couples). With the potential increase in income taxes and capital gains taxes, 529 plans could be favored since invested funds are free of both income and capital gains taxes as long as those funds are used for qualified education expenses for the beneficiary. With the passage of the Tax Cuts & Jobs Act of 2017 (TCJA), you can now withdraw up to $10,000 per year to pay for private primary or secondary school tuition (*withdrawals limited to tuition only).

High net worth individuals or those who are experiencing a particularly lucrative year may consider superfunding their 529 plan(s) by making contributions using five-year gift averaging. To read more about this strategy read our prior blog post here.

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